IFAs and VAT

I am rather confused about exactly which income received by an independent financial adviser (IFA) is a taxable supply and which is exempt for VAT purposes.

Recent HMRC guidance in their VAT Finance Manual at VATFIN7600 has helped but doesn’t seem to address some of the practical issues faced by an IFA.

It seems that all income derived from a recommendation to a discretionary fund manager (DFM) is subject to VAT but income for acting as an intermediary for all other investments pensions and protection policies is not.

The process of intermediation between a client and a product provider includes among other things fact gathering research and preparing a report of recommendations and options.

The final report may recommend that the client takes one of two options: to invest in a portfolio of unit trusts overseen by the IFA; or to invest with a...